Monday, June 27, 2011

Founder: A Portrait of the First Rothschild and His Time

The Book: Founder: A Portrait of the First Rothschild and His Time, by Amos Elon (Penguin Books, 1997).

Why you should care: Quite possibly the ultimate entrepreneurial “lemons into lemonade” story
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Today, the name Rothschild is synonymous with international high finance, encompassing multinational investment banking, merchant banking, and other business ventures throughout Europe. Some 250 years ago, there was only one man, Mayer Amschel Rothschild, and his coin and money changing business, which he operated out of the confines of Frankfurt’s Jewish ghetto, the Judengasse. This one man laid the foundations of the modern capitalist colossus. How did he do it?

He wasn’t born into wealth or even freedom. He was born into a society that by law allowed people like him to engage in only a handful of businesses—most were pawnbrokers, moneychangers, or dealers in second-hand goods. They were also required to live and work in the Judengasse, which they were only permitted to leave on rare occasions. He was born into a lower middle-class family. But he was born ambitious, and, in a society in which most people were illiterate, his culture valued education. It didn’t escape his notice that the most successful businessmen he knew were also the most learned Talmudic scholars.

Rothschild started with a small business selling collectible coins and medallions. His wares attracted the attention of Crown-Prince Wilhelm of Hesse, a collector of such things, who came to trust him in business dealings, got him started discounting bills of exchange, and soon appointed him a Court-Factor. With Wilhelm’s blessing, Rothschild went into business on his own on the side. Leveraging connections he made at court, his first major capital accumulation came from his profits as a military contractor in the early years of the Napoleonic Wars.

The rest, as they say, is history. The business ultimately became a family affair, with each of his five sons taking up residence in a separate European capital. As for consolidation of family wealth, it is perhaps notable that, through marriages between first cousins, two-thirds of Rothschild’s grandchildren were married to each other!

Taken out of its historical context, his story has a familiar ring to it. He devoted himself to learning. He started small. He shunned conspicuous displays of wealth. He made contacts and leveraged his business connections. And many a modern entrepreneur might do well to heed his instructions to his sons: “A man has to think before he acts, but after having thought matters over, everything else has to be left to God.”

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